Dell's Private: Now Comes The Hard Part

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After years spending billions on beefing up services and acquiring 30 companies, Dell is still first and foremost a PC company, with the bulk of its revenue tied to client device sales. Its next chapter must include stepping away from selling commodity boxes and moving into lucrative software and services.

But dropping out of the PC market is not something Michael Dell says he wants for his company—today the No. 3 PC maker. Even with PC shipments expected to drop 8 percent worldwide this year according to research firms IDC and Gartner, Dell said that two out of three business customers' first experience with Dell is buying a PC. About 90 percent of those customers go on to buy other products and services from Dell, according to the company.

"The obituary of the PC has been written 25 times. The term 'post-PC era' was first coined in 1999 by IBM. At the time, there were about 120 million PCs sold per year. Now there are 450 million PCs sold per year. So the post-PC era has been better for the PC than the pre post-PC era," said Michael Dell.

Dell's primary objective isn't ditching the PC; rather, it's how to muscle into the data centers of tomorrow where it can sell lucrative software and services. The challenge for Dell is how to get there. To that end, with PC sales driving cash flow and acting as a springboard to new business, Michael Dell says it comes down to internal leadership to turn old Dell into new Dell.

Vitagliano, a 30-year industry veteran and former channel chief at Juniper Networks, was hired in April and is part of Dell's effort to win SMB deals. SMB is the fastest-growing segment of Dell, with huge upside potential as a company's needs scale up into the data center as they grow.

Paul Clifford, president of Davenport Group, a St. Paul, Minn.-based solution provider, said Dell's aggressive pricing has helped his company win deals but, more importantly, Vitagliano has been rolling up his sleeves right alongside Davenport Group, helping it close deals. "We had an infrastructure overhaul we were bidding on. We knew they were leaning toward HP," Clifford said. "We sent Frank an email and by the end of the day he was on the phone with our customer," he said.

Vitagliano flew Clifford and the customer to Dell's offices, where the Dell vision was laid out. That personal touch, Clifford said, had his customer "doing backflips."

Other recent Dell hires include Anand Sankaran, a former executive at Wipro Infotech who headed up the company's global infrastructure services business.
Sankaran was hired the same day Dell officially became private and is now president of infrastructure services and cloud computing, overseeing 10,000 employees.

With these new hires and the recent management changes, Dell is prepping itself to cater to the customers it wants. To achieve this goal, Michael Dell said
he's gone to great pains to reorganize his company into four businesses (end user computing, enterprise solutions, software and services) to reflect his customers—consumer, SMB and large enterprise. Each business has its own leader who knows how go to market with very clear priorities, he said.

According to Dell's last reported numbers as a public company, the four business units are having mixed success. The enterprise solutions group business grew
8 percent year over year, with revenue of $3.3 billion in the second fiscal quarter, ended Aug. 2. Dell services saw anemic year-over-year growth of 2 percent, reporting $2.1 billion revenue, and its software division reported $310 million in revenue and an operating loss of $62 million, a 20.1 percent drop year over year. End user computing reported revenue of $9.1 billion, a 5 percent drop compared with the year-ago quarter.

Doron Kempel says selling hyper-convergence can be challenging for solution providers, but success will come from taking business from competitors that are unprepared or hesitant to embrace the technology.